PrefBlog

Glad to see that some people take piracy seriously:

About 20 percent of ships in the Indian Ocean and Gulf of Aden will use armed guards within the next 18 months, up from 12 percent, Peter Cook, spokesman for the Security Association for the Maritime Industry, said after a presentation yesterday in London.
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There have been 145 attacks and 22 ships hijacked by Somali pirates in the Indian Ocean so far this year, according to the International Maritime Organization, the shipping division of the United Nations. Somali pirates added at least $2.4 billion to transportation costs in 2010 as ships were diverted to avoid attacks off east Africa, said One Earth, a non-profit group.

The IMO, which had advised shipowners to avoid using armed guards, will probably approve vetting procedures for security operators this week, paving the way for their increased use, Cook said. The organization will discuss guidelines for hiring private armed guards this week, it said by e-mail on May 9.

Used to be that governments understood that their main business was promoting trade. Not any more.

There are some worries about the Toronto condo market:

Worries about the sustainability of the housing market could be stoked by a report from Urbanation Inc., which monitors the Toronto condominium market. The group says more than 50% of condominiums purchased in the last year were by buyers who do not intend to occupy their units and plan to rent in many instances.

Condominium rents in Toronto in the first quarter of 2011 were $2.11 per square foot compared to $2.09 a year earlier, a 0.8% increase. Condominiums being registered now and ready to be occupied are priced for sale at $450 per square foot range while newer units are going for $550 per square foot.

“What happens when these newer units hit the market?” said Ben Myers, executive vice-president of Urbanation. “At $550 per square foot a 750 square feet [condominium] is $413,000. You put 25% down and you have a mortgage of $310,000. Take a five-year variable rate mortgage at 3% with 25-year amortization and you get $1,475 a month mortgage. Your condo fee is $345, property tax is another $345 and you are up to $2,200 in carrying costs. That’s a huge [operating] loss [given the average rental rate would bring in just under $1,600/month]. People are buying these for capital appreciation.”

Ir was another good day for the Canadian preferred share market, with PerpetualDiscounts up 16bp, FixedResets winning 5bp and DeemedRetractibles gaining 7bp. Volatility was muted. Volume was relatively low.

The Committee to Protect Canadians from Competition has come up with a new bid for the TMX:

A group of nine Canadian banks and pension funds have offered to buy the TMX Group Inc., attempting to break up a planned merger between TMX and London Stock Exchange Plc with a richer offer that values the owner of the Toronto Stock Exchange at $3.6-billion.

The bid for all of TMX, which includes all but two of Canada’s six biggest banks, is worth $48 a share, sources said. That’s a 15-per-cent premium to TMX’s market price, sources said.
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The bid from the banks and pension funds will be made by a new company called Maple Group Acquisition Corp. In addition to cash, the banks and funds would merge their stakes in the country’s stock clearing system, CDS Inc., and a rival trading system, Alpha Group, with TMX as part of Maple.

Investors in TMX would get cash as well as new shares in Maple. The result would have the banks owning 25 per cent of the company, the pension funds 35 per cent and existing TMX shareholders the remaining 40 per cent, said a source familiar with the situation.

Lucky or Smart? A lot of guys achieve a measure of success and decide they’re not just smart, they’re invincible. And now another career’s been blown up:

Dominique Strauss-Kahn, head of the International Monetary Fund and a potential candidate for the French presidency, was charged with attempted rape and a criminal sex act on a New York hotel maid, police said.

The attack allegedly occurred yesterday against a 32- year-old female at a Sofitel hotel in midtown Manhattan, according to an e-mailed statement by the New York Police Department.
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The alleged victim is a maid at the hotel, New York Police Deputy Commissioner Paul Browne said. The assault occurred about 1 p.m. yesterday when the woman entered the $3,000-a-night suite — Room 2806 — Strauss-Kahn had checked into on May 13, Browne said in a telephone interview. Strauss-Kahn is alleged to have emerged from a bathroom naked and made two attempts to forcibly have sex with the maid, Browne said.

She managed to escape from the room and notified colleagues who called the police, Browne said. When officers arrived, Strauss-Kahn wasn’t there and his mobile phone had been left behind, he said.

Strauss-Kahn was in the first-class section of an Air France flight when it was minutes from departing.

Very hard to prove an unconsummated rape attempt. I’m more interested in what you get for three grand a night in a New York hotel. He’s being held without bail, which is a poke in the eye of France, not to mention him personally:

“He has almost no incentive to stay in this country,” Assistant District Attorney Artie McConnell told Jackson at the hearing in a packed courtroom in lower Manhattan. “He has an extensive network of contacts throughout the world.” France “does not extradite its nationals,” he said.

The judge agreed to hold Strauss-Kahn without bail, agreeing he is a flight risk.

The theatre has started already, with some people shouting it could be a set-up and others claiming that it’s old news.

The yuan took another baby-step towards becoming a global currency:

RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada (RY on TSX and NYSE), has announced the launch of its deliverable offshore Chinese Yuan (CNH) platform.

Commenting on the launch Ed Monaghan, Global Head of FX, RBC Capital Markets, said: “The ascent of China to the second largest economy in the world means its currency has grown in importance and is even more relevant to our global client base. We see significant future prospects in the CNH market and will be developing this business over the coming months.”

The new platform, which will originate from RBC’s operations in Hong Kong, will enable RBC Capital Markets to execute interbank trades in CNH with its clients and counterparties, offering FX Spot, Forwards and Swaps. This new offering builds on RBC’s existing CNY Non-Deliverable Funds product.

Hat tip to Assiduous Reader BG for bringing this to my attention!

This is interesting:

Higher education fails to provide students “good value” for the money they and their families spend, more than half of U.S. adults said in a survey.

The debate over higher education’s value “has been triggered not just by rising costs but also by hard economic times,” according to a report released yesterday by the Washington-based Pew Research Center. The organization, an independent research group funded by Philadelphia-based Pew Charitable Trusts, surveyed 2,142 adults, aged 18 and older, from March 15 through March 29.

There’s a new name in the bond markets:

Google Inc. (GOOG) made its first foray into the bond market with a $3 billion sale to pay back short-term borrowings at relative yields comparable to companies with the highest credit grade.
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Google, with total cash and marketable securities of $35 billion at yearend, according a regulatory filing, is tapping the corporate bond market as investment-grade borrowing costs tumble to about the lowest since November. Chief Executive Officer Larry Page, who replaced Eric Schmidt last month, is ramping up spending to expand in mobile and video advertising even as U.S. and European authorities mount investigations into the company’s business practices.

The world’s biggest Internet-search company split the sale evenly between three-, five- and 10-year notes, according to data compiled by Bloomberg. The 1.25 percent, three-year notes yield 33 basis points more than similar-maturity Treasuries, the 2.125 percent, five-year debt pays a 43 basis-point spread, and the 3.625 percent, 10-year securities offer 58 basis points above benchmarks, Bloomberg data show.

The Bank of Canada has released a working paper by Jason Allen and Teodora Paligorova titled Bank Loans for Private and Public Firms in a Credit Crunch:

Banks reliance on short-term funding has increased over time. While an effective source of financing in good times, the 2007 financial crisis has exposed the vulnerability of banks and ultimately firms to such a liability structure. The authors show that banks that relied most on wholesale funding were the ones to contract its lending the most during the crisis. Their results suggest that banks propagate liquidity shocks by reducing credit only to a certain type of borrower. Importantly, in the financial crisis banks passed the liquidity shock only to public firms. Furthermore, long-term relationships between firms and banks played an important role during the crisis. Public firms with weak banking relationships pre-crisis experienced a greater credit crunch than other public borrowers.

It was a mixed day on the Canadian preferred share market, with PerpetualDiscounts gaining 6bp, FixedResets down 3bp and DeemedRetractibles up 9bp. Volatility picked up a little, but not to any special extent. Volume was desultory.

Well, let’s think about bankruptcy … banks are no longer allowed to go bust … countries are no longer allowed to go bust … now, it would appear, power companies can no longer go bust:

Japan’s government will provide financial aid for Tokyo Electric Power Co. to protect the utility from bankruptcy as it pays compensation to those affected by the worst nuclear disaster in 25 years.

Japan’s government will create a body to handle claims made against Tepco, as the company is called, and will issue bonds to fund them, according to a statement released today after a meeting of Prime Minister Naoto Kan’s cabinet.
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“Our requirement is that the company continues to operate as a listed company and continue to provide a stable supply of power,” Trade Minister Banri Kaieda told reporters after the statement was released. He said Tepco bondholders rights will be maintained.

Power companies that operate nuclear stations will be required to pay into the compensation organization being set up by the government, according to the statement.

Tepco will be monitored by the government as a condition for aid to ensure full compensation will be paid to those affected by the disaster, Kaieda said earlier this week.

“Eventually, the matter could become one of how to share the burden between Tepco and the government, but it will be something to be decided in the distant future,” [Chief Cabinet Secretary Yukio] Edano said.

Still, it hasn’t done the Samurai market any harm:

HSBC’s unit HSBC Bank Plc sold 108.2 billion yen of five- year, 0.91 percent bonds priced to yield 31 basis points more than the yen swap rate, and 35.2 billion yen of floating-rate notes that pay 46 basis points over the three-month London interbank offered rate, according to data compiled by Bloomberg. The bank had planned to sell at least 50 billion yen of notes, according to a person familiar with the matter, who asked not to be identified because the information is private.
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Lehman defaulted on 195 billion yen of Samurai bonds when it filed for bankruptcy in September 2008, a collapse that froze global credit markets and curbed investor demand for all but the safest government debt. Today’s sale is the biggest without a sovereign guarantee since Citigroup Inc. sold 186.5 billion yen of three-year, 2.66 percent Samurai bonds to individual investors in June 2008, Bloomberg data show.

US inflation ticked up a bit:

The cost of living in the U.S. rose in April, led by increases in food and fuel costs that are starting to filter down to other goods and services.

The consumer-price index increased 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March, figures from the Labor Department showed today in Washington. Excluding volatile food and energy, the so-called core gauge rose 0.2 percent, also as projected.
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Oh, the joys of doing business in kleptocracies run by thugs:

Yahoo! Inc. fell for a third day as signs of tension with Alibaba Group Holding Ltd. raised speculation it may benefit less from part ownership of China’s largest e-commerce provider.

Concerns surfaced after a May 10 Yahoo filing that said Alibaba Group spun off the lucrative Alipay online-payments business, and then deepened the next two days amid conflicting statements from Yahoo and Alibaba over Alibaba Group’s disclosure of the transfer.
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Yahoo, based in Sunnyvale, California, fell as much as 7.1 percent to $15.96 in Nasdaq Stock Market trading. It has lost 10 percent since May 10, when it said the entire equity of Alipay had been transferred to a company controlled by Alibaba Chief Executive Officer Jack Ma.
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Alibaba was paid about 300 million yuan ($46 million) for Alipay by a company controlled by Ma, Caing.com reported today, citing public company registry data. Alibaba’s Spelich declined to comment on the report.

Alipay has a value of $5 billion, Brett Harriss, an analyst at Gabelli & Co., wrote in a report yesterday.

The Bank of Canada has released a discussion paper by David Bolder, Simon Deeley titled The Canadian Debt-Strategy Model: An Overview of the Principal Elements:

As part of managing a debt portfolio, debt managers face the challenging task of choosing a strategy that minimizes the cost of debt, subject to limitations on risk. The Bank of Canada provides debt-management analysis and advice to the Government of Canada to assist in this task, with the Canadian debt-strategy model being developed to help in this regard. The authors outline the main elements of the model, which include: cost and risk measures, inflation-linked debt, optimization techniques, the framework used to model the government’s funding requirement, the sensitivity of results to the choice of joint stochastic macroeconomic term-structure model, the effects of shocks to macroeconomic and term-structure variables and changes to their long-term values, and the relationship between issuance yield and issuance amount. Emphasis is placed on the degree to which changes to the formulation of model elements impact key results. The model is an important part of the decision-making process for the determination of the government’s debt strategy. However, it remains one of many tools that are available to debt managers and is to be used in conjunction with the judgment of an experienced debt manager.

I mentioned Jonathan Weill’s excellent column Greeks Blaming Speculators Sure Sign of Panic yesterday and now there’s reason to mention it again, now that Irshad Manji has written a column in the Globe titled The paranoid can’t handle the truth:

Routine, reactionary denial is a dead end. When conspiracy-peddling persists, what can ever be true? Indeed, the very idea of truth loses meaning. Which is why I can’t ascribe the popular label “truthers” to those who claim that 9/11 was itself an inside job.

It’s easy to dismiss the hyperventilating as simple nuttiness. But the nutters have an outsized impact on shared values, a crucial aspect of the glue that holds societies together. The decibel level of conspiracy merchants, amplified by the explosion of media platforms through which to express themselves, infects our very capacity for common purpose – and our human need for hope.

Is there a solution? I’d argue that students should be taught to think not just critically, but also “generatively,” so they can rationally reassemble the pieces of what they’ve just ripped apart. Thinking critically enables us to question the information we’re being fed, and that’s a good thing. But what then? Unless we can reason our way to factual accuracy, critical thinking easily degenerates into emotionalism – conflating emotion with evidence. Not a good thing.
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Americans, for starters, should ask at what point Ronald Reagan’s adage of “trust but verify” encounters its corollary – “verified, now trust.”

Without insisting on each of these halves, citizens in any society can’t achieve a consensus that’s whole enough to move on to new challenges. Blowhards will keep poking holes in old news, falling through those holes and toward a pit where believing in nothing becomes the hallmark of truth. Sounds to me like a lie.

This is an interesting counterpoint to Jonathan Weill’s observatins:

For instance, the first paragraph of the article said euro- area finance ministers and European Commission officials had scheduled a secret meeting for that night in Luxembourg. That same day, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker, who is chairman of the euro area’s council of finance ministers, told reporters for several news outlets that there was no meeting and that this part of the Spiegel story was wrong. Actually such a meeting did occur on May 6. The spokesman, Guy Schuller, later conceded he had lied.

Asked to explain why, Schuller told the Wall Street Journal that “I was told to say there was no meeting,” and that “we had certain necessities to consider.” The euro was falling on the Spiegel report and “there was a very good reason to deny that the meeting was taking place,” he said, namely “self- preservation.” Besides, he said, when Juncker says something to the markets, “nobody seems to believe it.”

And let’s not even get into Spend-Every-Penny’s blase dismissal of the Junior Republicans’ campaign pledge on the deficit.

Ms. Manji makes good points, but she ignores the other side of the equation. A world in which lying has become acceptable is a fertile ground for conspiracy-theory wingnuts.

A relatively quiet day on the Canadian preferred share market, with PerpetualDiscounts up 10bp, FixedResets gaining 3bp and DeemedRetractibles basically flat. There were two entries in the Performance Highlights tables, both MFC issues which went ex-Dividend today. Volume was low, although there were some pockets of size.

Foreclosures are down in the States, but it’s not really good news:

Foreclosure filings in the U.S. fell 34 percent last month from a year earlier as lenders already swamped with seized homes delayed action on thousands of additional delinquent mortgages, RealtyTrac Inc. said.

A total of 219,258 properties received default, auction or repossession notices in April, the fewest in 40 months, the Irvine, California-based data seller said today in a statement. It was the seventh straight month that filings dropped from a year earlier. They were down 9 percent from March. One in 593 U.S. households got a notice.

“Banks already sitting on thousands of properties they can’t sell as quickly and profitably as they’d like aren’t going to be anxious to accelerate foreclosures on tens of thousands more,” Rick Sharga, RealtyTrac’s senior vice president, said in an e-mail.

But commercial real-estate is doing well enough:

Investors are turning to secondary markets as credit availability improves and surging demand for properties in New York, Washington and San Francisco boosts prices and reduces returns in those areas. Cities such as Dallas and Houston are attracting real estate buyers because of the prospects for job and population growth, according to Robert Bach, chief economist for Grubb & Ellis Co., a Santa Ana, California-based broker.

Jonathan Weil made a good observation yesterday:

Whenever you see an issuer of securities — be it a sovereign nation or a Wall Street bank — blame speculators, journalists or rumor- mongerers for its troubles, you know the bosses there are panicking.

One could even add “bloggers” to that list, nowadays!

It was a mixed day in the Canadian preferred share market, with PerpetualDiscounts off 6bp, FixedResets up 3bp and DeemedRetractibles gaining 12bp; but all three entries in the Performance Highlights table were positive. Volume was very light and spreads on some of the less liquid issues reached ridiculous levels.